Economics Through A Looking Glass

Economics Through a Looking Glass

By Martha Randolph Carr

There are a lot of great thinkers who are putting their heads together right now trying to figure out how to get the economy going again. Many of them have put forward ideas that the federal government has gone ahead and tried but without success. At times, the news has gone in the opposite direction as if in direct defiance of a billion dollar bailout or an interest rate drop hovering near zero.

Henry Paulson, the Secretary of the Treasury, has had egg on his face more than once recently from declaring he had figured out some aspect of this mess only to watch it fail as yet another giant corporation screams for help. Last week it was Citigroup, which has been designated another too-big-to-fail along with AIG and General Motors. How ironic that the proposed white knight for Wachovia just one month ago is now teetering on disaster.

That news also begs the question of just how many corporations can't go under in a free market society. How many more are trying to time their SOS so that they are rescued, like AIG and can go on a government-paid holiday, and not abandoned like Lehman who had to go home? And, as the ideas du jour fail and consumer confidence continues to flag it becomes more likely that we're making promises we can't keep which will only hurt more as consumers become even more reticent to spend. That would be a perfect example of a vicious cycle.

Apparently, the mistake small business owners made who are facing the same credit crunch was to not be big enough. If only they had made the same reckless deals to gobble up unrelated businesses or traded in unregulated derivatives and had grown at a feverish pitch they might be in line for a big fat check as well. Oh well, hindsight.

There is a reason why humanity is often compelled to repeat the past and its part of why we're driving straight into a cycle that's already showing signs of failing miserably. It's because we don't like not knowing the outcome of anything. That's why our economists are constantly digging around past trends looking for similarities that might be put to good use in current situations.

However, the aspect of human beings that really separates us from any other living creature is our propensity for choosing something in the face of all logic. It's why five-inch heels that make a woman stand around on her tiptoes are in vogue or why a cup holder in a car was designed to hold a soda big enough to push Americans into obesity.

The only way out of any well-oiled cycle is for one side to change their behavior. In the past, consumers were happy to oblige and spend money they didn't really own but that gag isn't working anymore. Perhaps it's time for us to stop rewarding bad behavior and disassemble the conglomerate behavior.

There has been so much worship at the feet of bigger-is-better that we may be overlooking a solution. Unravel the businesses. Allow the segments that are failing to fail. Set loose the parts that are still viable, which means the parts that consumers still want. That creates the vacuum that will be filled by new products, new ideas. It's painful in the short term but reaps the greater benefits in the longer run.

The alternative is propping up obese corporations that are mismanaged and producing consumer goods that have fallen out of favor in a society that proposes to be democratic. The consequence that follows is that new solutions, new businesses find it harder to be seen or heard and more money is wasted. Allowing failure is the only way we can cultivate success, otherwise we will have to accept that we're creating a society without free enterprise. That's a very slippery slope.

Martha Randolph Carr's latest book, A Place to Call Home, a memoir about the reemergence of U.S. orphanages is available wherever books are sold. If you'd like Martha to come and speak to your group visit: www.newvoicespeakers.com. Martha's Big Adventure coming soon to World Talk Radio and Voice America. Email Martha at: Martha@caglecartoons.com or visit www.martharandolphcarr.com.